Episode 3: Daniel Estrada
86 Repairs CEO and co-founder Daniel Estrada is our guest. Daniel talks about managing repairs within a restaurant’s operation and how data can be used to help operators make better equipment purchasing decisions.
Episode 3: Daniel Estrada
James: Welcome to episode three of the Food Tech Podcast, where we explore the changing nature of the food industry and technology. We give operators quick, actionable ways to improve their business in the new omnichannel environment. I’m your host, James Shea, publisher of Food Delivery News. Today’s guest is Daniel Estrada, co-founder and CEO of 86 Repairs. Founded in 2019, the company runs an innovative platform that helps restaurant owners reduce maintenance costs. Welcome to the show, Daniel.
Daniel: Thanks for having me, James. How are you?
James: I’m doing well today. I’m hope you’re doing well.
Daniel: I am. Thanks.
James So why don’t we start off real quick? Maybe tell me a little bit about 86 Repairs and and what problem it is that you solve for the restaurant industry?
Daniel: Absolutely. So in a nutshell, 86 repairs is a management platform, the repairs and maintenance management platform built specifically for the restaurant industry. In other words, when something breaks in one of our customer’s restaurants, they just send us a text and we manage the whole process of getting it fixed. Now behind the scenes, there’s a lot of technology and data and people that make that work, but that’s the the solution in a nutshell.
James: And how did you kind of come to that as being one a solution, but also a problem right now in the restaurant industry?
Daniel: Yeah, it’s a good question. So we saw a lot of problems around managing repairs and maintenance specifically in the restaurant industry. And the first one, the one that I sort of connected with originally is that restaurant operators have so much pain around managing repairs. If you’ve ever managed a restaurant before, you know that when something breaks, suddenly that is a really important problem that you need to solve as quickly as possible. You know, you’re walking cooler goes down and you have $15,000 worth of food inventory, and that is a high, high priority for a gym. And so you have to call a vendor. Oftentimes, if it’s after five p.m., you’re waiting for a technician to be paged. They don’t call you back. You have to chase them down. You have to call other vendors, figure out who can get there quickly to solve a problem for you. And every piece of equipment in the restaurant is mission critical in some way, right? You’re using every piece of equipment in that restaurant to deliver a great guest experience to deliver food product that your guests are there to to buy. And so all of those things make this a really stressful and painful problem, not just for the staff, but for the operator to see this being managed very inconsistently across their different restaurants. There’s a lot of fragmentation in the service space specifically, so you have to have a bunch of different vendors for different categories of service and in different geographies. So operators are just wasting a lot of time and money on repairs and maintenance, and that’s really where it caused us to ask the question. You know, is there a better solution here? What can we actually do to solve this problem?
James: Yeah. And now, historically, most people who have kind of gotten involved in restaurant technology lately have done more customer facing orders, those type of things, you know, QR codes. But how should operators really think of the role that back a house technology can play and the data that it collects?
Daniel: Yeah, I think that’s a great point. I mean, we see the adoption of technology accelerate in part because of, you know, pandemic pressures. But even before that, you know, growth in the restaurant space was accelerating. And and you’re right, I think most of that innovation has been on the front of house, you know, guest experience, online ordering, third party delivery, those kinds of things. We are starting to see more. Probably in the last, I would say, three to four years, we’ve seen more on the inventory management side, right? Food cost management, spend management. There’s some great platforms out there to help operators with sort of the business side, the back office side of of managing a restaurant. But we haven’t seen a lot in terms of managing the physical facility. There are a lot of legacy software solutions that are sort of generic to managing support tickets, but those solutions don’t work well for your desk workforce like like folks who work in the restaurant industry. And so that is that back of house kind of technology and the ability to be, you know, much more predictive in terms of when things go down and planning for that downtime, doing that maintenance in a proactive way, those things that are really new concepts. And I still don’t think we’re there yet as an industry, but that’s where we need to go. We need to move into a place where managing the facility is predictive. Just like you can predict dining room volume, you know how many covers you’re going to do in a given shift, looking at your point of sale data from the prior week and prior month, the prior year. That’s why we’re collecting 86 repairs, is collecting a ton of data about repairs and maintenance, and we use that data to help customers make better decisions and have real insights about what’s happening in their facilities.
James: Now, can you think of anything from the data, any big? The kind of conclusions that you come to or overall trends that that restaurant operators might want to know about.
Daniel: Man, you know, there is there is a lot there. So a couple, a couple of thoughts. If folks go to our website, 86Repairs.com, they can find our state of repairs report, which we just started publishing. We published the first one about a year ago, and there’s another one coming out pretty soon. And we include a lot of different metrics about the cost of servicing different types of equipment that can be an interesting resource. I think speaking at a high level, you know, the problem with repairs and maintenance is that it’s not your manager’s highest priority until suddenly it becomes your highest priority in the restaurant. And so because of that, there’s a very kind of inconsistent process that’s followed. So we work with a lot of multi-unit restaurant operators, and they knew that repairs are being managed differently in every restaurant based on the vendor relationships that each manager has, the experience level of those jams and their willingness to troubleshoot issues and really dig into problems. A lot of the data that we’re collecting is things like let’s take troubleshooting, for example, what troubleshooting steps can a staff member in the restaurant take before a vendor is ever dispatched so that we’re not dispatching vendors to flip circuit breakers, clean filters to plug things in? And I know that sounds crazy, but those kinds of things happen in the industry all the time. And so folks are spending three or four hundred dollars a visit to have a service company come out and do something that their staff could have done. That’s all connected back to data. We want to make the operation more efficient. We need to understand, collect and understand those data points to give us real insights. Things like warranties, we see those being mismanaged quite a bit. So understanding which equipment is under warranty and flagging those pieces of equipment so that the staff are calling and paying for service on something that should be covered by the manufacturer. That happens more frequently than you’d imagine. And then other things like when is it time to replace that piece of equipment rather than over investing and repairing it? All those different data points coming together to help make the operation better. And those are all things that we’re collecting and looking at and providing insights to for our customers.
James: And I think I read one somewhere that you one of the things you talked to restaurants about is giving local management a little bit more control. Like you say, they could spend five hundred dollars without having to get a hold of upper management to try and make the whole process more efficient. Is that a conversation? You have a lot with restaurants.
Daniel: Yeah, I think again, going back to the point that this is something that typically is mandated very reactively and managed very much as an ad-hoc process, you know, at that point in time, when something breaks now we’re leveraging all these resources to try to get it fixed. But before it happens, not a lot of resources are being leveraged to to build a good process. And so the example you gave, I think, is a great one, right? Does your staff understand what they’re spending approval, you know, limits are? Or do you have a set? We call it an SOP standard operating procedure, but do you have spend limits? Do you have an escalation path to right, especially in larger, more complex groups? Who is that next level of escalation when when spending needs to be approved? Do you have service accounts, credit accounts set up with your top vendors so that when someone shows up and the manager on duty doesn’t have a payment card, you’re not dealing with code issues or the vendor is demanding payment before they’ll do work. All of those things documenting and understanding who your preferred vendors are and who you don’t want to be using all that kind of organization can help a lot of upfront, and we do see some managers putting some of those things in place. But it tends to be on a piece of paper in the closet that passes for an office in the back of a restaurant. And so those are all things that we automate through our platform and set up for customers early on because it adds so much value. When something breaks, you’re in a much better position to deal with those issues.
James: I find it interesting that you’re a tech company, but you’re dealing with a lot of really basic. I mean, I don’t know if that’s the right word, but you know, really structural issues about an operation not to do with technology at all.
Daniel: Absolutely. It’s interesting. I say to our team a lot. One of the things we would sell at eighty six trillion tons of software and data and lots of things kind of living behind the curtain, if you will. But actually a big part of what we sell is a better process, right? We sell consistency so that every time a repair is managed to manage consistently and to a high level of quality, and those are the things that are very hard for operators to do. And I’m not I’m not trying to throw a restaurant operators on the bus. It’s an extremely complex. I think what we’ve seen through COVID are super resilient industry, I have only the utmost respect for restaurant operators, but they’re actually limited in the information that they have available to them. And this kind of gets back to the data point, right? Let’s take something simple, like comparing service companies. Really, what we’ve seen in the industry is that operators only have enough information to compare hourly rates. Right. So I can look at two vendors and I can say this one costs ninety five dollars an hour and this one’s costs. This would cost one hundred and fifteen. But what I don’t know is the more expensive hourly rate, because that vendor actually doing the work twice as fast. Do they have a higher first time fixed rate so they don’t have to come back for a second visit as often? What are those other metrics, your quality and cost of the work that we can be tracking and then giving our customers insights into how those or how those vendors are performing? So that’s an example of where in a restaurant breeders just don’t have a lot of information because this data has never been tracked before, it’s never existed in the industry before. And so to their credit, they’ve made do right and managed this for a long time, but it’s been very painful.
James: You know, as you kind of build in and say, have you know, a restaurant group with 10 or 20 or 30 locations and you began collecting data, how are you able to make the operation more efficient and make these repairs part of their whole operation?
Daniel: It’s I think it’s a good question. I think when operators can do. We talked a little bit about this whole idea of Essop already, right? So having some of these things documented and having your staff trained on how these procedures work, just like you have opening and closing procedures and checklists. I think that can be really helpful in a well-run restaurant. We tend to see some training and some focus on that. Again, operators don’t have access to the data that we have access to, right? That’s that’s one of the reasons we exist as we’re focused on collecting it, whereas your average restaurant operator doesn’t have the time. That’s not why they’re in business. But having that that is open places is a really, really helpful strategy. I think we are also we also talked a little bit about some of the efficiency opportunities where we see a lot of time and money being wasted. So we talked to a lot of customers who want to catalog all their equipment and have had a hard time doing that. But I think understanding what’s under warranty, what the term of that warranty is and understanding, for example, refrigeration equipment often has a longer warranty on on the compressor than on the rest of the unit. So you might have a five year warranty on a compressor in an underground or cooler when the main unit itself, the body of the unit, is maybe no longer under warranty. So it’s those kinds of details that tend to get operators tripped up, dispatching a vendor who is not the authorized service provider for that manufacturer. If a piece of equipment is under warranty, you can often avoid void the warranty if you if you do that. So it’s small things like that spending too much money, repairing things, not knowing that something’s really exceeded its useful life and should be replaced. Those are some of the big things that we see. I’d say preventive maintenance probably is another area that we could talk a lot more about, but I think a lot of operators have had bad experiences with preventive maintenance and maybe don’t believe in the value of it as much as they should.
James: Yeah, I would assume, you know, like the average to say replace a compressor is $X, right? Like you, you have a sense of what that’s going to be and you can tell one of your clients, right, you got overcharged for that or something along those lines, right?
Daniel: That’s right. I think that brings up a point that I think is missed in this space often, which is that there’s not a lot of trust between restaurant operators and service companies. And I would like to say it’s it’s because, you know, some bad apples have spoiled the bunch in the past. I don’t think the most serious companies are out to get us right. They’re not purposely ripping off customers or even inadvertently ripping them off. I think there’s a lot of bad blood out there. And so, you know, this is an example of where having strong relationships and really pushing a solid process makes a big difference.
James: Yeah. And that kind of goes into the skilled trades, right? Like, I mean, just like restaurants, you know, skilled trades of of repair and maintenance of equipment is a labor shortage. How is that having an impact on just being able to find people to service this equipment?
Daniel: Yeah, I think it’s a great point. I think operators should understand that the vendors are working with or having the same kinds of labor shortages that we’re feeling in the restaurant industry and that’s playing out in a few different ways. So number one, the lead times for service have been increasing. So there is more demand on those service companies. Let’s take a common piece of equipment like a like a deep fryer. We saw. In 2020, from the beginning of the pandemic, really the start of the pandemic in the U.S. through the end of 2020, we saw repair volumes actually increased 46 percent. And between March 2020 and the end of last year, that was up 93 percent. So the demand for repairs has increased and there are few factors related to that. And so all of the service members are short staffed because just like restaurants, they furloughed folks during the pandemic, they laid folks off, and a lot of those people haven’t come back into the industry. And so there’s already a shortage of skilled trades. Expertize, right? We we have a shortage of plumbers, electricians and folks who are certified to work on food and beverage equipment. That was true before the pandemic, and it’s just that much worse now. And so what’s happened is not just lead times, but also costs have increased so that the average cost of servicing cooking equipment like a deep fryer went up thirty eight percent last year. And that’s based on all the data we have about the repairs that we’ve managed for thousands of customers around the country. Those are the two big things taking longer to get things fixed. Costs are increasing and that’s putting pressure on the industry, on restaurant operators themselves.
James: Yeah. Now you know that the restaurant industry over the last two years has changed drastically with offering them as dining delivery all these different new paths to purchase food. I guess where does the back of house part of the industry really fit into that? And how has it had to change and adapt to that?
Daniel: The biggest shifts that we’ve seen, and again, we can sort of talk pre and post pandemic because I think there’s been a lot of change and probably changes that would have happened anyway, but have just been accelerated number one. Menu changes are having an impact on equipment and as menu changes are happening for a couple of different reasons. The profit pressures, cost pressures on restaurant operators which are eating into their profit margins, are affecting the menu choices that operators make. So we’re seeing operators slim down their menus, which affects the P, the load on the equipment. If you had 10, I’m just game use round numbers. If you had 10 menu items, 10 popular menu items spread across 80 pieces of equipment, can you narrow that down to five menu items the spread across 30 pieces of equipment to load on that equipment, 30 pieces of equipment is going to be a lot higher, and if you’re spreading the load of your menu across a bigger equipment. So actually, the menu changes affect which pieces of equipment are getting the highest utilization, which affect how much money you have to spend repairing and maintaining that equipment. Menu changes are big. I think another reason we’ve seen menu changes being made is that a lot of food items don’t travel well. And so when you see restaurants who historically were either not selling through off premise channels at all or did very little of their business that way, and they’ve suddenly shifted to doing much more of their business or in some cases, all of it outside of their dining rooms. They’re making different choices about the food product. So because a steak with a side of charred asparagus did not travel as well as it gets overcooked in the back of the back of an Uber Eats drivers car. So those kinds of menu changes are really big. And then the other thing I would say here is that off premise doesn’t really play by the same rules. In other words, there are no capacity limits the way you have on your dining room. The dayparts are a lot more fluid, so your off premise channels just behave differently, right? The orders come in at whatever volume they come in. And if you’re slammed, you’re not just slammed to the capacity of your dining room, you slam to the capacity of how quickly people can place orders on on DoorDash or Uber Eats that same product. Your kitchen hasn’t gotten any bigger, your staff hasn’t got any bigger. In fact, it’s gotten smaller. You just have the added demand that isn’t capped by the same rules that you would have had in the dining room.
James: Yeah, I’ve seen that a lot lately that operators are having a real challenge of how do you manage the up and down flow of online orders when you still have people coming in who are ordering? And exactly, you know, do you just turn DoorDash off or like? What do you do when your staff is overwhelmed with too many orders at one time?
Daniel: Absolutely. And another reality of the off premise game is that when a franchise order, for example, runs a limited time offer and they’re just blasting all kinds of marketing, digital marketing, marketing through delivery apps, not to mention TV ads and all that stuff, those Alto’s there’s limited time offers can be pretty taxing on some specific pieces of equipment, right? There’s been a lot of talk about shake machines, right ice cream machines and in the industry, and frying equipment and things that are unique to specific menu items that where when a franchise or is pumping up the marketing on something that can have a big impact on the franchisees who are operating those stores.
James: Now, do you work with with the owner as if, like, say, you know, they need to reorganize or remodel the kitchen, do you kind of work with them to say like, Hey, you know, if you’re going to need five fryers, maybe this is the way to go. Like, do you work with them on that level?
Daniel: Well, we don’t bill ourselves as restaurant consultants in that way or as general contractors, but we do often get asked about and can provide insights to customers about is which brands and models of equipment are the most reliable, what the total cost of ownership of that equipment is. This gets back into being more proactive about the decisions you’re making historically, because there hasn’t been any of this data. It’s very hard to say I should buy X Y Z brand of fryer or ABC brand of fryer because the difference is we’re kind of in the sales and marketing. It was hard to know. Often people have these historical knowledge or experiential knowledge. It’s very circumstantial about, Oh well, I only buy pick fryers because they’re the best. Well, does the data actually support? That is a different question. And so I think these kinds of decisions being proactive around what you’re buying, how much money you should expect to spend on repairs, whether certain types of planned or preventive maintenance are actually worse than are they going to decrease your costs. Those are the kinds of insights that often customers are asking us for.
James: Well, thank you so much for joining us today. Is there anything else you’d want to add or any point you would want to make as we close?
Daniel: No. Happy to be here. It’s great to chat with you, James. I think this is a really hard time to be in the restaurant industry, but it’s a really exciting time to. There’s so much technology adoption and so many opportunities to continue evolving. I would just encourage operators to embrace all that change that we’re living through and make the most of it because this is a time of real important and exciting transformation for the industry. Thank you so much. Thank you.